(Correct in bullet and last paragraph to show bond yields
lower, not higher, across curve)

* Canadian dollar at C$1.0711, or 93.36 U.S. cents

* Trade deficit widens in November, October data revised
lower

* Bond yields slightly lower across curve

By Alastair Sharp

TORONTO, Jan 7 The Canadian dollar hit
a one-week low against its U.S. counterpart on Tuesday after
Canada posted a much-larger- than-expected trade deficit,
knocking market hopes that the beleaguered export sector might
be starting to recover.

The November deficit and a sharp downward revision to
October's numbers knocked the wind from a nascent growth spurt
for the Canadian economy.

"There was some hope late last year that exports showed some
pick-up, especially in September, but with the revision to
October and again the weaker number in November, it showed that
it was probably just one-off strength in September," said
Charles St-Arnaud, Canadian economist and currency strategist at
Nomura Securities International in New York.

The weak domestic data contrasted with the U.S. trade
deficit hitting its lowest in four year in November as exports
hit a record high.

The United States is Canada's main trading partner, with
about three-quarters of Canada's exports going to its southern
neighbor.

The loonie, as Canada's currency is colloquially known,
spiked to C$1.0719, or 93.29 U.S. cents shortly after the data
was released and later hit C$1.0720. That was its weakest since
Dec. 30. It last traded at C$1.0711, or 93.36 U.S. cents.

St-Arnaud said there is a 30 percent probability the Bank of
Canada cuts interest rates in the next six months if economic
growth slows further and inflation remains below the central
bank's target.

Overnight index swaps, which trade based on expectations for
the policy rate, are not forecasting a change in rates in the
next 12 months.

Yields on Canadian government debt were lower across the
maturity curve, with the price of the two-year bond
up half a Canadian cent to yield 1.129 percent, while the
benchmark 10-year bond's price rose 3 Canadian cents
to yield 2.713 percent.
(Reporting by Alastair Sharp; Editing by James Dalgleish)

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